Morrison & Foerster Discusses Corruption Perceptions Index for 2017

On February 21, 2018, Transparency International (“TI”) released its annual Corruption Perceptions Index (“CPI”) for 2017, surveying and ranking perceptions of public sector corruption in 180 countries and territories, on a scale of 0 (highly corrupt) to 100 (very clean). A score close to 100 indicates more freedoms, access to information about public spending, stronger standards of integrity for public officials, and independent judicial systems. Scores below 50 are considered failing, possibly due to lack of government accountability and lack of oversight, while scores below 30 indicate severe systemic corruption that violates human rights, prevents sustainable development and fuels social exclusion.

TI noted that the 2017 CPI “highlights that the majority of countries are making little or no progress in ending corruption.” The same is true for Asia-Pacific: the average score of the 31 Asia-Pacific countries surveyed was just 44, a clear indication that public sector corruption remains a serious problem. Although higher than the worst performing regions, Sub-Saharan Africa (32) and Eastern Europe (34), the Asia-Pacific average of 44 is still a failing score.

Still a Serious Problem

Although there were no shocks in the CPI scores and rankings, the data for 2017 reflects that public sector corruption continues to be a problem for many Asia-Pacific countries. More than half of all Asia-Pacific countries earned a 2017 CPI score below 50. Seven countries in the region score 30 or below, indicating deep-rooted, systemic corruption – and the Asia-Pacific region includes several of the world’s worst scorers, including Cambodia (21), North Korea (17), and Afghanistan (15). Perhaps most troubling is that this year’s CPI data shows that several borderline or poorly performing Asia-Pacific countries are continuing multiyear declines, including Malaysia, the Philippines, and Maldives.

Stability or Stagnation?

There were few significant changes in the survey. More than half of Asia-Pacific countries earned the same scores or within one or two points of their scores in previous years. Asia-Pacific’s average score of 44 in 2017 is identical to its score in 2016. Of the 31 countries surveyed, 15 earned higher scores over the previous year, 8 earned lower, and 8 earned the same or were new to the survey. Among those with scores lower than 50, 10 earned higher scores than the previous year, 6 earned lower, and 3 kept their score.

There were very few notable improvements between 2016 and 2017, with North Korea experiencing the greatest gain by increasing its score by 5 from 12 to 17. Myanmar is the country that has seen the greatest improvement over the past 5 years, going from 15 in 2012 to 30 points today, but is very much an outlier amongst its neighbors.

These figures indicate that, in general, Asia-Pacific is in a state of stagnation, with the occasional incremental improvement. It is clear that corruption will continue to be a widespread concern across the region and change will not occur soon.

A Diverse and Complex Region

The Asia-Pacific region is incredibly diverse in terms of economic and social development, legal systems, and politics, and this is reflected in the high variance in scores across the region. New Zealand (89), Singapore (84), Australia (77), Hong Kong (77), and Japan (73) are among the least corrupt countries in the world. Others in Asia-Pacific are among the most corrupt. Even if a company is located in a country with a relatively high score, risk arises wherever it does business. As we have seen in recent enforcement actions, such as that involving Keppel Offshore & Marine Ltd., companies with a global or regional base in Singapore are not free of risk – as they often do business in some of the most challenging jurisdictions around the world.

This brief summary does not begin to capture the nuances of how corruption occurs within and across countries in the region. But for anyone doing business in Asia-Pacific, the CPI deserves close consideration as one point of reference. The full CPI data set is a rich source of information that includes historical data, tools for comparing countries by geographic and group membership, and additional risk and development statistics.

This post comes to us from Morrison & Foerster LLP. It is based on the firm’s memorandum, “Corruption Perceptions Index for 2017 Reveals Little Improvement in Public Sector Corruption in Asia-Pacific,” dated March 5, 2018, and available here.